Is Indian investment in Ethiopian farms a 'land grab?'

Investment by Indian-owned Karuturi Global has raised questions about whether Ethiopia is literally giving away the farm, or conversely, launching a 'green revolution' to help Ethiopia feed itself.

ByWilliam Davison, CorrespondentDecember 23, 2011

Addis Ababa, Ethiopia — When an Indian company invests hundreds of millions of dollars in Ethiopian commercial farming, is it boosting Ethiopia's food reserves and modernizing agricultural practices? Or is it grabbing land and displacing Ethiopia's poorest citizens?

The debate over Indian-owned Karuturi Global's investments in Ethiopia's Gambella region may sound extreme, but it is representative of the strong emotions one finds across the developing world about the subject of agricultural investment.

In Ethiopia – where critics are aghast at the government for inviting foreign capitalists to grow cash crops for export while millions still rely on handouts – the rancor is hindering much-needed constructive discussion on how to improve a sector of the economy that employs most of the population.

The worldwide trend is not in doubt. Globally, about 45 million hectares (111 million acres) of farmland were leased in 2009, compared with a previous average rate of 4 million hectares a year, the World Bank says. More than 70 percent of the deals were in Africa, most of them in Sudan, Mozambique, Liberia, Ethiopia, Nigeria and Madagascar.

The reasons are equally clear. It is estimated that global food production will have to increase 70 percent by 2050 to feed 9 billion mouths. One way to contribute to this is to cultivate under-utilized land – something which Africa has a relatively large stock of.

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Ethiopia is a prime example of land availability, according to the government. The country has 74.3 million hectares of arable land, of which 12 million is cultivated. Another 3.5 million hectares has been earmarked for leasing and 350,000 hectares of large plots have been rented in the last two years, it says. The Oakland Institute, a research group, says the area leased is ten times the official figure.

Antiquated methods

Despite it being the backbone of the economy and employing around 80 percent of the country's 85 million people, Ethiopian agriculture is antiquated, with oxen dragging wooden plows a common sight. Even the staunchest opponent of agri-business is likely to admit that the smallholder- and subsistence-dominated sector is ripe for modernization – although almost all of them would object to Ethiopia's approach.

Organizations like Oakland and the International Institute for Environment and Development (IIED) have methodically highlighted the inadequacies and injustices of the process. But such constructive concern has been latched onto by government opponents, who have added acquiescence with “land grabs” to kleptocracy and genocide in their litany of the state's evils. Officials – in unison as always – dismiss all criticism, insisting the policy is well-managed and beneficial to all.

Located on the border with Sudan, lowland Gambella is a focal point for the leases – and for the debate. The government's plan is for 1.2 million hectares – almost half of the region – to become commercial farms. Since 2008, six Indian, one Chinese, and Saudi Arabian companies have leased a total of 225,012 hectares in the state, ruling party-owned media says, with another 190,000 hectares going to Ethiopians. The official line is Gambella's lack of development, sparsely-populated land, and plentiful water makes it a suitable location. Critics believe only the bottom line of foreign firms benefit, while agro-pastoralists groups such as the Anuak and Nuer are deprived of resources they have used for eons.

Sensationalized debate

Much coverage of this debate tends to the sensational. A piece by the Guardian, for instance, claimed that there was evidence of displacement because of Karuturi’s rice, palm oil, sugar and cereals operations, but none was provided.

Huffington Post columnist Alemayehu G. Mariam – a vociferous US-based critic of the Ethiopian government – re-reported Karuturi's farm manager's comment that the company had not seen the land before renting it. Managing Director Sai Ramakrishna Karuturi begs to differ. "I stayed in Gambella for 45 days researching the area before narrowing down on the location," he responds.

The tone of these types of critiques – portraying deals merely as agro-imperialism facilitated by a bungling state – enrage officials, sidelining crucial issues and further reducing the already slim chances of engaging the government.

This is problematic, as constructive dialog is essential.

As with other large projects in Ethiopia, a major worry is the breakneck speed which they move from conception to implementation. Such was the regional administration's haste to host Karuturi; two years later the federal government reduced the lease by two-thirds to 100,000 hectares, describing the original plot as unmanageable.

But this act of caution appears to be an exception.

The IIED identified weak contracts as a problem in some African land deals. The Karuturi agreement is a case in point. While the government refers to technology transfer and jobs as benefits, no reference is made to either in the 9-page contract. Karuturi is given the right to build infrastructure – including homes and hospitals – but no obligation is placed upon it to provide for communities, nor any stipulation made about how much of each crop it grows, let alone where it sells them. There are only non-specific demands that land is "developed" to certain extents within specified periods of time.

The government claims projects are assessed for their effect on surroundings by the environmental regulator, but there is scanty evidence of this. Karuturi also refused to disclose its study. Oakland found environmental impact assessments were "rarely carried out prior to project implementation."

Local environmental groups and researchers are unanimous in believing that if EIAs are submitted by investors, they lack rigor – and are neither properly assessed nor monitored by government bodies lacking the capability and autonomy to do so.

Given the intensity of the scheme in Gambella – and Ethiopia's other peripheral regions – thorough planning is vital. The long-term productivity of farms could be threatened by the extraction of large amounts of water, experts speculate. The draining of wetlands and cutting of trees reduces the area's rich bio-diversity and could disrupt an ecosystem that contains gigantic swathes of forest, grassland, and swamps.

Gambella's inhabitants appear equally disregarded. The Ethiopian Forum for Social Studies found that there were no discussions with locals while preparing leases. Oakland said community consultation is "non-existent". As a result, both conclude, residents are likely to suffer from the deals. With plans to resettle three-quarters of the region's scattered population into villages also underway, communication needs to improve. Karuturi's record is also unimpressive. Its claims to have provided water, light and mosquito nets for the village of Ilea, a short walk from its headquarters, seemed baseless.

In October, Karuturi announced that its first harvest, 60,000 tons of maize, had been lost to flooding, costing the company $15 million. It is too early to say whether the land investments will help Ethiopia feed itself – at present, Ethiopia remains the world’s largest food-aid recipient – but Karuturi claimed the grain would have been used to aid the millions suffering from drought in the east and southeast of the country.

Also of interest was the potential earning from the 12,000 hectares of maize: If the whole 100,000 hectares was as profitable, the harvest would have brought in $125 million. The company is paying $116,000 annually to lease the land – or 0.09% of that potential revenue from one harvest. Critics say that the government should be extracting more cash from the lease.